Do countries or industries explain momentum in Europe?

This paper investigates the question whether individual stock momentum in Europe is subsumed by country or industry momentum. We introduce a portfolio-based regression approach, which directly allows to test hypotheses about the existence and relative importance of multiple effects (e.g., momentum, value, and size), even when only a moderate number of stocks are available. Our results suggest that the positive expected excess returns of momentum strategies in European stock markets are primarily driven by individual stock effects, while industry momentum plays a less important role and country momentum is even weaker. These results are robust to the inclusion of value and size effects.